Bid to buy UK's Royal Automobile Club gets red-flagged, IPO now likely

LONDON (CNNfn) - The UK government blocked the 450 million pound ($275 million) takeover of the Royal Automobile Club by U.S. group Cendant Thursday, paving the way for the flotation of the roadside-services provider.
Cendant offered what analysts said was a premium price for the RAC, hoping to merge the business with its existing Green Flag roadside-assistance unit. The deal would have meant a 35,000 pound windfall for each of the RAC's full members, but now they may have to wait for their cash.
The government, in the shape of Trade and Industry Secretary Stephen Byers, demanded the sale of Green Flag, on competition grounds, before allowing the RAC deal to proceed. Parsippany, N.J.-based Cendant said this condition made the deal commercially unfeasible, and pulled out of the bidding.
The RAC immediately appointed investment bank Dresdner Kleinwort Benson to head an initial public offering, although RAC sources said they will also consider selling the business to a trade or financial buyer. An IPO could raise around 400 million pounds, and would take place in the summer.
The RAC is the second-largest provider of roadside assistance to motorists in the UK, with 29 percent of the market, behind the Automobile Association with 48 percent. Green Flag has 12 percent of the market.
In preparation for the IPO the RAC has reorganized its executive structure, bringing in Sir Michael Angus, chairman of brewing giant Whitbread and formerly a senior executive at Unilever, as chairman.